The replication of human immunodeficiency virus is controlled by complex mechanisms involving a number of cellular and viral regulatory proteins. Three proteins encoded by the HIV genes, tat, rev, and nef, are thought to control the virus life cycle and might account for HIV pathological characteristics such as latency and conversion to lytic infection. The products of the tat and rev genes are known to be positive regulators and are essential for viral replication. While the function of the product of the nef gene product, p27(nef), has not yet been established, it may function as a negative regulator by serving as a transcriptional suppressor. We have used plasmids and recombinant Vaccinia virus vectors to express myristoylated and non-myristoylated p27(nef) in a variety of cell lines. We have shown that myristoylation is required for p27(nef) subcellular localization to the cytoplasmic membranes and for its maximum suppression of HIV transcription. A number of cellular binding proteins have been identified by co-immunoprecipitation with p27(nef) antibodies. One of these proteins also binds the HIV LTR. These p27(nef) binding proteins are being examined as possible mediators of the signaling mechanism whereby cytoplasmically anchored p27(nef) is able to suppress the nuclear transcription of HIV.